Judge: Tim Cook should answer for Apple’s role in “do not poach” deals

US District Judge Lucy Koh has ordered Apple CEO Tim Cook to give a deposition about Apple's role in a series of deals between top tech companies to not recruit each other's employees. At a hearing this week, Koh said Cook, Google chairman Eric Schmidt, and Intel CEO Paul Otellini must be deposed to provide testimony about the deals, which the companies had agreed to dissolve after a US Department of Justice probe into the practices in 2010. The testimony is related to a civil lawsuit filed by five former employees of the companies, who claim that they and others lost out on better salaries due to the policies.

Beginning around 2005, executives from Apple, Adobe, Google, Intel, Intuit, and Pixar had begun to make agreements to not "cold call" each other's employees and hire them away. Though the agreements were made separately over the course of about three years, the Department of Justice contended that the net effect of the agreements constituted an anti-competitive cabal that "restrained competition for affected employees without any procompetitive justification and distorted the competitive process."

In other words, highly skilled employees couldn't leverage other job opportunities for better pay, because the other companies that might hire that employee had agreements that prevented them from making job offers in the first place.

The DoJ filed an antitrust lawsuit in federal court against the six tech firms. All six firms eventually agreed to a five-year settlement which barred making any "no solicitation agreements."

But that wasn't the end of the matter. Five former employees of the six companies filed their own civil antitrust lawsuit, alleging they and other employees suffered real economic harm from the collusion. At the first hearing in the civil suit on Thursday, Judge Koh noted that internal e-mails among executives showed they believed the "no cold call" agreements would have net economic benefits since they would not have to offer individual raises to counter potential employment offers from other firms.

In Apple's case, former CEO Steve Jobs had been copied on the e-mails in question, but not (then) COO Tim Cook. Apple's lawyers argued that Cook had no knowledge of the agreements to not hire competitor's employees, but Koh wasn't buying it.

"I find it hard to believe a COO would have no say over salary and compensation for all employees," Koh said.

Koh must also decide whether or not to grant the case class-action status, which the plaintiffs claim affected not just engineers, but also corporate chefs and even administrative assistants. The damages could amount to hundreds of millions of dollars, plaintiff attorneys said.

Adobe counsel Robert Mittelstaedt said the data didn't support those claims, however. "You can't assume that if someone got a raise from a cold call" that it would "ripple to everybody else," Mittelstaedt argued in court. "Why would a company give a raise to someone in a negotiation if it knew it had to turn around and give a raise to everyone else?"

Adobe counsel Robert Mittelstaedt said the data didn't support those claims, however. "You can't assume that if someone got a raise from a cold call" that it would "ripple to everybody else," Mittelstaedt argued in court. "Why would a company give a raise to someone in a negotiation if it knew it had to turn around and give a raise to everyone else?"

Have to agree wholeheartedly on this one point. This doesn't equal a class-action, as the only people who were harmed were those who were smart enough to want to leverage offers from other companies to improve their positions where they were.

Though, to be fair, the smart thing to do is to actually move to another company strategically. Taking a new position usually gets one a solid pay increase, whereas using an offer to squeeze more money out of your current employer usually gets one put under the microscope while your superiors start looking for a replacement for your untrustworthy self.

The problem is there is an inherent chilling effect because employees still working at said companies will not be looked upon favorably for participating in a class action.

Put short, suing your employer for higher pay is a good way to lose your job.

Unfortunately, this is all too likely to be true. By making it a class action, however, affecting all class members, it makes it more difficult to engage in a retaliatory firing. How can they fire 80% of their workforce (percentage made up)? There may also be protections built into the case which the judge could order, such as the employers could be ordered to find and pay each class member unless they specifically opt out. Still, you do make an excellent point.

I could see this being an issue if the agreement was to not hire employees from the other companies. But this was about them not trying to actively recruit people. An employee could still apply for an open position, be given an offer, and then go to their employer to see if they'll match. This sounds quite a bit like a bunch of lazy people who feel like they have a right to sit back passively and be wooed by other companies, rather than have to actively look for another job.

As someone who has always worked in positions where I've only once had a prospective employer approach me with a job offer on their own, let me get out my really tiny violin for these people.

Adobe counsel Robert Mittelstaedt said the data didn't support those claims, however. "You can't assume that if someone got a raise from a cold call" that it would "ripple to everybody else," Mittelstaedt argued in court. "Why would a company give a raise to someone in a negotiation if it knew it had to turn around and give a raise to everyone else?"

Have to agree wholeheartedly on this one point. This doesn't equal a class-action, as the only people who were harmed were those who were smart enough to want to leverage offers from other companies to improve their positions where they were.

I dissagree. When a few people in a group get raises, their co-workers will see that and some of them will ask for raises and some will get them. Thus, the average wage goes up across the board. And if a position is vacated because a person moved to a higher paying position at another company, the company that has to rehire will more likely up their wage on that position in order to attract/keep the new hire.So, by having these non-poaching agreements in place it has a chilling effect on wages across the board.

I'm not sure that I see the problem here, as the agreement simply wasn't to cold call each other's employees and there are a whole lot more tech company than Apple, Adobe, Google, Intel, Intuit, and Pixar.

So if I work for Google, Apple (or any of the other 4) agreed not to cold call me for employment opportunities, but that doesn't stop Microsoft, Yahoo or a host of other companies from soliciting me.

How exactly does that damage the employees? They could still look-up job postings from the other companies and apply for them, since there was, no agreement not to hire the employees from another company (the agreement was just not to call them).

Adobe counsel Robert Mittelstaedt said the data didn't support those claims, however. "You can't assume that if someone got a raise from a cold call" that it would "ripple to everybody else," Mittelstaedt argued in court. "Why would a company give a raise to someone in a negotiation if it knew it had to turn around and give a raise to everyone else?"

Have to agree wholeheartedly on this one point. This doesn't equal a class-action, as the only people who were harmed were those who were smart enough to want to leverage offers from other companies to improve their positions where they were.

I dissagree. When a few people in a group get raises, their co-workers will see that and some of them will ask for raises and some will get them. Thus, the average wage goes up across the board. And if a position is vacated because a person moved to a higher paying position at another company, the company that has to rehire will more likely up their wage on that position in order to attract/keep the new hire.So, by having these non-poaching agreements in place it has a chilling effect on wages across the board.

Hmm. I'll concede a partial point there, as your rationale makes good sense. As a recruiter, though, I've seen many examples of negative backlash when an employee goes to his/her boss with an offer from a competitor in hand, looking for a raise. If someone is absolutely critical to their company, this can work, but it will only normally work once. Once an employee shows that they're entertaining other offers, management remembers this, and the countdown to replacement starts. The employee has gone to their manager and put a gun to his head, saying 'give me a raise or I'm gone,' and as soon as the raise is granted they throw the gun away.

I won't normally work with someone if I even get a hint that they'd consider a counteroffer. There are better ways to improve your W2.

The whole 'do not poach' idea is silly to me, but then again I make my living calling people at work to see if I can lure them away to greener pastures. :-)

...As a recruiter, though, I've seen many examples of negative backlash when an employee goes to his/her boss with an offer from a competitor in hand, looking for a raise. If someone is absolutely critical to their company, this can work, but it will only normally work once. Once an employee shows that they're entertaining other offers, management remembers this, and the countdown to replacement starts. The employee has gone to their manager and put a gun to his head, saying 'give me a raise or I'm gone,' and as soon as the raise is granted they throw the gun away...

I agree with you on this point. It has been my own policy to never use a competing offer to demand a raise from my current employer.

Since I first heard about this back in 2010 these companies have been on my "no way in hell" list. I've been approached twice by Apple and made certain they understood that because of their unethical hiring practices I would not be considering any position they offered, regardless of pay or responsibilities.

This is the kind of thing unions were formed to oppose. I'm generally pretty anti-union, but this kind of conspiracy harms workers across an industry. These companies depressed average wages, and other corporations not in on the conspiracy indirectly benefitted from that decrease as they no longer had to make more competitive offers since a large portion of the industry, including many of its biggest players, refused to compete for talent.

I could see this being an issue if the agreement was to not hire employees from the other companies. But this was about them not trying to actively recruit people. An employee could still apply for an open position, be given an offer, and then go to their employer to see if they'll match. This sounds quite a bit like a bunch of lazy people who feel like they have a right to sit back passively and be wooed by other companies, rather than have to actively look for another job.

As someone who has always worked in positions where I've only once had a prospective employer approach me with a job offer on their own, let me get out my really tiny violin for these people.

Not quite accurate, according to the article. It appears that the companies wouldn't extend offers to employees from elsewhere within the cabal, no matter how they were made aware of the opportunity.

I find it amusing to think that internal HR/recruiters would actually cold-call in the first place. Most that I've known shy away from the head-hunting side of things, preferring to sift through applications or postings on Linkedin rather than call another company and find the person they need.

Since I first heard about this back in 2010 these companies have been on my "no way in hell" list. I've been approached twice by Apple and made certain they understood that because of their unethical hiring practices I would not be considering any position they offered, regardless of pay or responsibilities.

This is the kind of thing unions were formed to oppose. I'm generally pretty anti-union, but this kind of conspiracy harms workers across an industry. These companies depressed average wages, and other corporations not in on the conspiracy indirectly benefitted from that decrease as they no longer had to make more competitive offers since a large portion of the industry, including many of its biggest players, refused to compete for talent.

You're really overstating your point, as are the people idling the suit. There is still plenty of competition and workers are still able to get offers from other companies by applying to them. Is that a little harder than sitting around waiting for a cold call? Sure, but its not the end of the world. You could also argue that if it did depress salaries, that would have made top talent more affordable for smaller players, and everyone would have benefitted from that.

On another topic, the deal between Apple and Google would have broken down on its own a few months later due to the developing rivalry between the two. The DOJ intervention was an unnecessary waste of government attention. Similarly, Microsoft lost its influence for reasons largely unrelated to the anti-trust suits. When companies get too big, they collapse under their own weight- having the government poke at them is at best useless, and at worst harmful. (An example of harm would be the constant government harassment of 'monopoly' airline Pan Am, which was so hamstrung by rulings on this and that that it collapsed putting many people out of work.)

The last time I checked a COO was not the CFO, who would have had access to employees' salaries.

Depending on the company and their internal structure, HR, the keepers of employee data, can report to pretty much anyone, and it's not very often that it's the CFO. Most HR heads report to the CEO, according to some admittedly dated info here: http://www.shrm.org/Research/SurveyFind ... owhom.aspx

Having access to an employee's salary figures usually requires nothing more than being higher on the ladder than they are. Would Cook have cared to look at this data? I doubt it, but I don't doubt that he could have easily seen it if he wanted to. His exposure to it was probably as part of an amalgamated report about total costs, so I think the DoJ's pumping a dry well if they're looking for him to be directly involved in this one.

As a recruiter, though, I've seen many examples of negative backlash when an employee goes to his/her boss with an offer from a competitor in hand, looking for a raise. If someone is absolutely critical to their company, this can work, but it will only normally work once. Once an employee shows that they're entertaining other offers, management remembers this, and the countdown to replacement starts. The employee has gone to their manager and put a gun to his head, saying 'give me a raise or I'm gone,' and as soon as the raise is granted they throw the gun away.

Even for someone who has no intent of "using" an offer itself as leverage, simply knowing it exists on their own part can be very empowering in terms of willingness to push for a raise. Knowing you have a solid, dependable alternative to fall back on can completely change your outlook and actions.

The idealized case study to showcase this would be an employee who's happy with their job, not looking for alternatives, but is cold called with a higher offer. Realizing they themselves quite realistically could be making more, they start entertaining the idea of a raise and at least take a look around for what might be expected of their skill level, position, and employment history, then make a solid argument in favor of a raise.

The effect of an outside force shouldn't just be completely discounted, imo. Plenty of people don't seek raises when they probably should. Just because someone doesn't leave for greener pastures doesn't mean there is no effect of knowing that they are there, and not everyone continues to job search once they have a position which seems reasonably comfortable, for a number of reasons. There's a huge difference between knowing some people make more than you and being told someone is willing to pay you more.

As such, while this isn't as harmful as a full blown noncompete agreement, I can definitely see where it potentially would have an aggregate chilling effect on salary increases, particularly for longer term employees.

The problem is there is an inherent chilling effect because employees still working at said companies will not be looked upon favorably for participating in a class action.

Put short, suing your employer for higher pay is a good way to lose your job.

Those employees might not be looked at favorably after the fact - but they cannot be fired on the grounds for this topic. Otherwise that leads to additional litigation in the form of wrongful dismissal - which in turn really puts the company in a bad spotlight if it loses.

The problem is there is an inherent chilling effect because employees still working at said companies will not be looked upon favorably for participating in a class action.

Put short, suing your employer for higher pay is a good way to lose your job.

Those employees might not be looked at favorably after the fact - but they cannot be fired on the grounds for this topic. Otherwise that leads to additional litigation in the form of wrongful dismissal - which in turn really puts the company in a bad spotlight if it loses.

It's not wrongful for a negative mark to be placed in your record. It's not wrongful for an employee not to be promoted if an equally competent employee is available. It's not wrongful to be terminated for being redundant. It's not wrongful to reorganize your teams due to changed in market conditions. It's not wrongful to ask too much out of an employee.

Since I first heard about this back in 2010 these companies have been on my "no way in hell" list. I've been approached twice by Apple and made certain they understood that because of their unethical hiring practices I would not be considering any position they offered, regardless of pay or responsibilities.

This is the kind of thing unions were formed to oppose. I'm generally pretty anti-union, but this kind of conspiracy harms workers across an industry. These companies depressed average wages, and other corporations not in on the conspiracy indirectly benefitted from that decrease as they no longer had to make more competitive offers since a large portion of the industry, including many of its biggest players, refused to compete for talent.

You're really overstating your point, as are the people idling the suit. There is still plenty of competition and workers are still able to get offers from other companies by applying to them.

To apply for a job one must know it exists. Quite frankly, most of the positions we fill at my current employer are filled before people find them on our websites. Recruiting has a very explicit job, go out and find candidates, it is what they are paid to do. You seem to be under some impression that it is a passive job, but it is not if you want your company to be competitive.

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Is that a little harder than sitting around waiting for a cold call? Sure, but its not the end of the world.

It is not possible for me to know every opportunity that I might fit. I found my current job because the employer reached out, and recieved quite a bonus and incentive package to leave my previous position in the process. Honestly the position had not occurred to me, and because I was happy in my previous position I was not looking. However I clearly benefitted greatly, and it would not have occurred if my current and previous employer had a illegal agreement not to poach. In fact I know exactly how much that would have cost me by now, and that number is nearly a hundred grand over the past two years. And I never would have known that I missed out.

Yes I take this seriously.

Quote:

You could also argue that if it did depress salaries, that would have made top talent more affordable for smaller players, and everyone would have benefitted from that.

You can argue that, and I can just say I don't give a shit. That is an argument for paying everyone minimum wage, or less, because it will somehow 'benefit everyone'. Bullshit.

Quote:

On another topic, the deal between Apple and Google would have broken down on its own a few months later due to the developing rivalry between the two. The DOJ intervention was an unnecessary waste of government attention. Similarly, Microsoft lost its influence for reasons largely unrelated to the anti-trust suits. When companies get too big, they collapse under their own weight- having the government poke at them is at best useless, and at worst harmful. (An example of harm would be the constant government harassment of 'monopoly' airline Pan Am, which was so hamstrung by rulings on this and that that it collapsed putting many people out of work.)

There are currently two active Federal District Court Judge in San Jose courthouse,(Fogel is off to DC for his Federal Judicial Center gig) about 20 total in Norther District of California, less than 700 nation wide. Consider the volume of Apple's litigation, it would actually be odd if she never handle another Apple case again in her judicial career.

Does the settlement with the DOJ have anything to do with Google's spontaneous 10% raise across the board a couple of years ago? I didn't connect the dots at the time, but I think it was right about the same time as the settlement.

I'm not entirely clear on it, but I do have to wonder if it has anything to do with significant operations in California for several of these companies. What I'm more familiar with are non-compete agreements, which I understand don't fly at all in CA.

Not that they tend to be enforceable legally in most cases anyway, but it can be a huge disincentive for a company. Do you want an employee bad enough that you're willing to offer a raise at least, if not bonuses and incentives, etc, plus then piss away a bunch of money on lawyers on top of it?

pkirvan wrote:

You could also argue that if it did depress salaries, that would have made top talent more affordable for smaller players, and everyone would have benefitted from that.

That's idiotic. Better for the other employers, but screw the employees, right? It isn't like they're not replaceable cogs in corporate machines.

Companies collude like this all the time, but usually not in such an explicit a d direct way. Long before HP became its current basket case I can remember that they joined some sort of organization where each member company contributes anonymous compensation data that gets reported to the members in aggregate so they can "benchmark" themselves against competitors (competitors in the sense of impetigo g for talent in the same labor pool).

This is obviously a collusion to ensure that they can minimize compensation since the market would quickly signal under compensation through an inability to hire. The compensation of an employee should be tied to the benefit the company receives from that employee–that is, value based compensation. Schemes like this are designed to subvert that. Put simply, companies don't want to pay you what you're worth to them.

I doubt these practices are illegal, but IMHO they should be. If companies want an open market for labor they should simply pubicly publish their compensation metrics and encourage their competitors to do likewise. Free and open markets only work when information is transparent.

The problem is there is an inherent chilling effect because employees still working at said companies will not be looked upon favorably for participating in a class action.

Put short, suing your employer for higher pay is a good way to lose your job.

Those employees might not be looked at favorably after the fact - but they cannot be fired on the grounds for this topic. Otherwise that leads to additional litigation in the form of wrongful dismissal - which in turn really puts the company in a bad spotlight if it loses.

It's not wrongful for a negative mark to be placed in your record. It's not wrongful for an employee not to be promoted if an equally competent employee is available. It's not wrongful to be terminated for being redundant. It's not wrongful to reorganize your teams due to changed in market conditions. It's not wrongful to ask too much out of an employee.

No one said it would be an immediate termination, after all.

If you are terminated for any reason after filing a suit it is suspicious. If you and others like you are terminated but no one else, that is almost a guaranteed wrongful termination suit. Slights of hands like that are usually transparently motivated and they do get noticed. It can be wrong to ask too much out of an employee because that can be considered retaliatory.

It may be suspicious, but at the same time you can't win a lawsuit over suspicion.

To give you a 'non suspicious' example, since we're talking about companies the size of behemoths, HP, which I worked at for several years, had multiple departments doing the same thing. Reorganization to reduce redundancy was therefore always a constant threat, and each department was always trying to 'stay alive' by making the work unique and therefore incompatible.

Then HP bought Compaq, doubling the amount of redundancy.

So now you have reductions based on reorganization to merge duplicate and unnecessary groups across both companies as well as within the same company.

How can you say your dismissal was wrongful when you are part of a mass several hundred wide reduction?

It may be suspicious, but at the same time you can't win a lawsuit over suspicion.

To give you a 'non suspicious' example, since we're talking about companies the size of behemoths, HP, which I worked at for several years, had multiple departments doing the same thing. Reorganization to reduce redundancy was therefore always a constant threat, and each department was always trying to 'stay alive' by making the work unique and therefore incompatible.

Then HP bought Compaq, doubling the amount of redundancy.

So now you have reductions based on reorganization to merge duplicate and unnecessary groups across both companies as well as within the same company.

How can you say your dismissal was wrongful when you are part of a mass several hundred wide reduction?

2 things

First layoffs in the hundreds are bad press in general and if you are doing so than there are other issues at play.Secondly when they layoff people at that scale they usually have a package available for each employee. That includes 1 year salary + unemployment.

A company wouldn't layoff hundreds to get rid of a single complainant. If there was a class action maybe a firm would try it but if a large majority of the class was let go then it would become an issue.

To win a case all one needs is preponderance of the evidence. This is civil not criminal law. Circumstantial evidence can be used to make that case and the more cases the merrier for that. If it is an issue of regular layoffs the company would be going through the complainants attorney to handle that particular layoff. Most likely negotiating the terms of release with them. If they don't know what they are doing or trying to be circumspect they will just treat them like the rest of the employees. THis is not to say you are invincible if you file a suite against your company you can still get fired for wrongful action

If there is in fact redundancy, you can afford to get rid of the entire team that houses the bad actor. In fact if this is premeditated they can arrange for several bad actors to be eliminated (they may not all have been marked for the same problems, but they can all be resolved at once).

And, yes, they would offer a severance package. I got one too. The severance package has a couple strings, however; you can't work for a competitor, in general, and you can't sue your employer.

The issue then is suspicious activity; if you eliminate only 10% of your workforce and 90% of said terminations were part of the class action you would have a point.

If, however, only 10% of the terminations were part of the class, and there were still members of the class employed, you don't.

And every year members of the class get let go, slowly, incrementally, to avoid suspicious behavior.

And of course the class could try to file a wrongful suit against Apple, but at any point Apple could say, "The team was let go", "There are remaining members of the class", and "There is a history of poor performance against this person. We are not a charity".